Tuesday, 25 May 2010

Do you really think that Singapore pays too cheap for our Raw Water?

Much has been said and argued about the Malaysia-Singapore Water agreements since before PM Najib took office, much of the argument are rather based on politics rather then looking at it from a commercial view point. One must note that in the Agreements beside paying dirt cheap for the raw water it extracts from Johor (3 sen/1000gallons) the Singapore Government also sells treated water to the Johor Government at dirt cheap price(50sen/1000gallons) the Singapore Government also have to make compensation payments for the land lost due to the water catchment, annual rents and also pay for the construction of new dams, water intake structure and new water treatment plant together with the main supply pipelines and managing the operations and maintenance of all the water catchment and infrastructure that it built.

We say the raw water we sell to Singapore is too cheap at 3 sen/1000gallons, but under the agreement Singapore also have to sell treated water to Johor for 50 sen/1000gallons. If you do the maths that means Singapore sells to Johor treated water at about 11 sen/cubic meter and how much does the Johor Government can resell water to the state domestic consumers…the water tariff starts at about 70sen/cubic meter last time I check. That’s a tidy profit for the Johor Government. That is a bit simplistic but just goes to show that Malaysia and Singapore both have their points in the upcoming negotiations and remember that every time Singapore sells us treated water they may make a loss as the electrical and water treatment chemicals will go up all the way to 2061..and our abundant raw water if not extracted will flow into the sea and evaporates comes back to land and fall back onto land as rain and become raw water available for extraction again forever.

I am however greatly confident that PM Najib without the political baggage of the past will be able to solve this water issue with PM Hsien Loong, just like the KTM land issue that has been resolved, cool heads should prevail. Of course the Opposition lead by its defacto leader Lim Kit Siang and DAP appointed leader Anwar Ibrahim will try to find fault to gain political points on whatever PM Najib does.

Below is a good condensed report on the the 4 water agreements that Malaysia and Singapore ever signed..after 2061 nobody would know what’s going to happen, I envisage Singapore with its growing population will still need water from Malaysia, heck Malaysia and Singapore could probably be back in a union at that time.

Singapore and Malaysia have signed four agreements to regulate the supply of water from Malaysia to Singapore. The first - signed in 1927 - is no longer in force. Water imported from Malaysia under the other three agreements - signed in 1961, 1962 and 1990 - now meets about half of Singapore's water demand. However, this will be reduced after the 1961 pact expires in 2011. The government has also stated that Singapore can be self-sufficient in water by the time the 1962 and 1990 agreements expire in 2061.

1927 AgreementThis was signed on 5 December 1927 between the municipal commissioners of the town of Singapore and Sultan Ibrahim of the state and territories of Johor. It allowed Singapore to rent 2,100 acres (8.5km2) of land in Gunong Pulai for the purpose of supplying raw water from the area to Singapore. An annual rent of 30 cents per acre (per 4,047m2) was payable on the land, but the water was free. Johor set aside an additional 25mi2(64.7km2) of land and agreed not to alienate any part of this land without the consent of the Singapore commissioners. If the latter wanted to reserve any part of this plot for drawing water, they had to give notice to the Johor government and pay an annual rent of $5 per acre. In return, Johor could obtain 800,000 gallons (3,637m3) of treated water from Singapore daily at a rate of 25 cents per 1,000 gallons (per 4.55m3).

1961 AgreementThis was called the Tebrau and Scudai Rivers Water Agreement. It was signed on 1 September 1961 between the city council of the state of Singapore (the predecessor of the Public Utilities Board or PUB) and the government of the state of Johor. By then, Singapore was a self-governing state within the British empire while Malaya was already an independent nation. The 1927 agreement was declared void in this document.

The agreement gave Singapore the full and exclusive right to draw off all the water within the designated land at Gunong Pulai, Sungei Tebrau and Sungei Scudai for a period of 50 years up till 2011. Singapore was to pay an annual rent of $5 per acre for the land and a charge of 3 cents for every 1,000 gallons of water. Singapore also agreed to provide Johor with a daily supply of treated water up to 12% of the raw water it drew, subject to a minimum of four million gallons (18,184m3), and at a price of 50 cents per 1,000 gallons.

1962 AgreementCalled the Johor River Water Agreement, this was signed on 29 September 1962 between the Singapore city council and the Johor state government. Valid for 99 years up till 2061, it gave Singapore the full and exclusive right to draw water from Johor River up to a maximum of 250 million gallons per day (mgd) (1.14 million cubic metres a day). In return, Johor was entitled to a daily supply of treated water from Singapore up to 2% of the raw water it supplied.

Singapore had to pay rent for the land it used "at the standard rate applicable to building lots on town land". The water prices remained the same as in the previous agreement - 3 cents per 1,000 gallons of raw water supplied to Singapore and 50 cents per 1,000 gallons of treated water sold to Johor. After Singapore and Malaysia stopped using a common currency, the prices became denominated in Malaysian ringgit.

The 1961 and 1962 agreements provided for a price review after 25 years, with arbitration being the agreed course of action if bilateral price negotiations failed. However, the Johor government chose not to revise the prices at both opportunities, in 1986 and 1987.

The Independence of Singapore Agreement (also known as the Separation Agreement) signed between the governments of Singapore and Malaysia on 9 August 1965 guaranteed the 1961 and 1962 water agreements.

1990 AgreementThis was signed on 24 November 1990 between PUB and the Johor state government. It was supplementary to the 1962 pact and would also expire in 2061. A separate document was signed on the same day by the governments of Malaysia and Singapore to guarantee adherence to the agreement.

Under this agreement, Singapore was allowed to construct a dam across Sungei Linggui to facilitate the extraction of water from Johor River, with Johor setting aside about 21,600ha (216km2) of land for the project. Singapore agreed to pay RM320 million as compensation for the permanent loss of use of the land and its associated revenue, in addition to a premium of RM18,000 per hectare (per 10,000m2) and an annual rent of RM30 for every 1,000ft2 (per 92.9m2) of the land. The cost of building and maintaining the dam would be borne by Singapore.

In return, Singapore could buy (from Johor) treated water generated by the new dam. This would be over and above the 250mgd of raw water that it was allowed to draw from Johor River under the 1962 agreement. The price of this additional supply would be calculated based on a fixed formula: the weighted average of Johor's water tariffs plus 50% of the surplus from the sale of this water by PUB to its consumers after deducting Johor's price and PUB's cost of distribution, or 115% of the weighted average of Johor's water tariffs, whichever was higher.

This agreement was a follow-up to the memorandum of understanding (MOU) signed on 28 June 1988 between the two countries' prime ministers at the time, Lee Kuan Yew for Singapore and Mahathir Mohamad for Malaysia. The signing of the MOU was hailed as a breakthrough in Singapore-Malaysia water relations, the culmination of six years of difficult negotiations.

Beyond 2061The Singapore government has stated that it will not renew the 1961 agreement which expires in 2011. Attempts to reach a new deal with Malaysia to secure water supply for Singapore beyond 2061 have not borne fruit despite years of tedious negotiations. To reduce Singapore's dependence on imported water, the government has taken steps to increase the size of the local water catchment area and to build up the supply from non-conventional sources, namely NEWater (reclaimed water) and desalinated water. With the various water projects progressing well, government officials have assured Singaporeans that the country can be self-reliant in water by 2061 if it needs to be.